Yamaha Motor Co Unsp/Adr

Thank you very much for making the time for Yamaha Motor Company's earnings presentation for the fiscal year ending December 31st, 2023. My name is Kurabe of the Corporate Communications Department, and I'll be chairing today's meeting. Before explaining the contents of the meeting, I'd like to introduce the attendees for today. We have Mr. Yoshihiro Hidaka, President and Representative Director. and Mr. Motofumi Shitara, Director and Senior Executive Officer. After a brief overview of the financial results from Mr. Hidaka, Mr. Shitara will explain the details of each business segment, and then there will be a Q&A session via Zoom for the members of the press and analysts. The earnings presentation deck is available on Yamaha Motors' website. We will now begin our presentation of the business results. Hello everyone. My name is Hiraka from Yamaha Motor Company. Thank you very much for taking time out of your very busy schedules today to attend Yamaha Motor Company's earnings presentation. First, I'd like to express my deepest sympathies to the victims of the Noto Peninsula earthquake. We pray for the safety of the people in the affected areas and for the earliest possible recovery and reconstruction. We would also like to thank you for your continued understanding and support of our business activities. I will now give an overview of the business results. First, here are the key points. Please see page 4. In 2023, we achieved record sales and operating income. In the core business of motorcycles, shipments increased due to firm demand and improved production of premium models from the second half of the year. In marine, shipments of large outboard motors and water vehicles increased, while the robotics business continued to face difficult conditions due to the sluggish Chinese economy. Next is the outlook for 2024. Regarding the external environment, emerging countries are expected to continue to experience some economic slowdown in Vietnam, but there is continued strong demand in Indonesia, India and Brazil. In developed countries in Europe and the US, the economy is stagnating due to rising interest rates and inflationary effects, but consumption among high-income earners in the US will remain strong. In addition, ocean sea freights are expected to fall and the surge in raw materials is expected to slow down. In our businesses, semiconductor procurement will normalize, providing a tailwind to produce premium models of motorcycles in emerging countries. In the marine business, we aim for greater than market growth by introducing new models to the large outboard motor market in the U.S. where demand remains strong. The downturn in the robotics market has bottomed out and is expected to recover in the second half of 2024. We will maintain high profitability and efficiency and enhance business competitiveness as outdoor leisure demand peaks out and the competitive environment in the market returns to normal. We plan to achieve record high sales and operating income for the fourth consecutive year in 2024 by controlling expenses with a balanced approach. I would also like to explain today our efforts to enhance corporate value. next is unit sales and inventory please see page 5. the table on the left compares our unit sales by major product against the actual results in 2022 unit sales increased mainly in indonesia india and brazil where demand remains strong Outboard motor unit sales of small and medium-sized models declined significantly. ATV and ROV unit sales declined due to slowing demand. Unit sales of SPVs decreased due to an increase in inventories in the overall bicycle market. Mounted unit sales to China and other Asian countries decreased. The graph on the right compares the current state of market inventories with appropriate levels. In regions and businesses where inventories are above appropriate levels, production adjustments are being made, while at the same time sales promotion measures are being strengthened to reduce our inventory levels. Next, the overall business results for 2023. Please take a look at page 6. In 2023, net sales were up 107% from prior year at 2 trillion 414 billion yen. Operating income was 250.7 billion yen, 111% for the prior year level. Operating income ratio was 10.4% up 0.4 percentage points from the prior year. Ordinary income was 242 billion yen, 101% of the prior year's level. Net income, attributable to shareholders of the parent company, was 164.1 billion yen, 94% of the prior year's level. EPS was 163.57 yen, 96% of the prior year's level. Shipments of motorcycles in emerging countries increased due to the improved procurement of semiconductor components. Furthermore, in addition to the expanded effect of passing on prices, a tailwind from the weak yen also contributed to the increase in profit. The prevailing exchange rates are 141 yen to the U.S. dollar and 152 yen to the euro. Emerging market currencies against the U.S. dollar are as stated. Here are the operating income factors in 2023. Please see page 7. As you can see, the increase in revenue contributed 22.2 billion yen. The breakdown is as follows. Price raises and rebates totaled 49.4 billion yen. Unrealized profit impact was positive 4.7 billion yen. Negative 500 million yen in financial services. Decrease in scale minus 15.7 billion yen. Product mix and others were negative 15.8 billion yen. and net cost reduction was minus 3.2 billion yen. That breaks down into 20.5 billion yen positive contribution in cost reductions and 23.7 billion yen in cost increases. In addition, an increase in growth strategy expenses resulted in a negative 7.3 billion yen. The increase in SG and A expenses resulted in a negative 32.7 billion yen, with foreign exchange effects a positive 46.8 billion yen. Next is the outlook for 2024. Please see page 8. Although demand varies depending on region and business, we plan to increase net sales and each profit line over the prior year, factoring in improved supply of premium model motorcycles in emerging countries and a turnaround in the marine business. From 2024 onward, the company will adopt IFRS international financial reporting standards in place of the previous Japanese gap. Revenue, 2.6 trillion yen. Operating income, 260 billion yen. Operating income ratio, 10%. Net income, 175 billion yen. EPS is expected to be 196.49 yen. The assumed exchange rates are 140 yen to the US dollar and 150 yen to the euro. Emerging market currencies against the US dollar are as shown. next at the operating factors for twenty twenty four please see page nine as shown the increase in revenue contributes forty billion yen which breaks down as minus 1.6 billion yen in pricing, which is the sum of price increase effects and rebates, unrealized profit impact, positive 60.9 billion yen, financial services plus 2.3 billion yen, scale increase plus 44.8 billion yen. The total of product mix and others is minus 66.4 billion yen. Cost reduction was minus 4.3 billion yen. This breaks down into 16.2 billion yen in cost reductions and 20.4 billion yen in cost increases. In addition, a decrease in gross strategy expenses results in an increase of 0.8 billion yen. Decrease of 32.9 billion yen due to an increase in SG&A expenses. Forex impact will be a positive 700 billion yen. On a Japan gap basis, we expect a 4.3 billion yen year-on-year increase. The impact of the change in accounting standards results in a further additional 5 billion yen increase. Operating income on an IFRS basis is expected therefore to be 260 billion yen. Next to the key financial indicators, please see page 10. The graphs show ROE, ROIC, ROA, and equity ratio, which are the KPIs of the midterm plan and represent our efficiency. The charts show results for 2022 and 2023 and the forecast for 2024. For 2024, the solid line is the IFRS forecast. The dotted line is calculated and shown under Japanese GAAP for reference. In 2023, the ROE 15.4%, ROIC of 9.2%, and ROA of 10.5%. The equity ratio, 43.7%. Each indicator is expected to achieve the three-year average target for the period of the mid-term plan. Next is our shareholder returns policy. Please see page 11. Regarding dividends, we aim to pay stable and continuous dividends while taking into consideration the outlook for business performance and investments for future growth. We will also flexibly return profits to shareholders in accordance with scale of cash flow. We aim to achieve a total payout ratio of 40% over the medium-term plan period. The company conducted a 3-for-1 stock split on January 1, 2024. and the dividend for the fiscal year ending December 31, 2024 is the amount after the stock split. We plan to increase the dividend from fiscal year 2023 to 50 yen per share for the full year. For your reference, the annual dividend without considering the stock split would be 150 yen per share. In addition, we plan to repurchase 20 billion yen of Treasury stock in 2024. As a result, the total return ratio will be 41% for the three-year period from 2022 to 2024. This is expected to exceed the 40% total return ratio committed to in our mid-term plan. We will continue to strive for stable and continuous returns to our shareholders. Next is our progress of medium and long-term measures. Please see page 12. First, I'd like to discuss progress in each area of portfolio management, which has been implemented since the current midterm plan. In core businesses, including motorcycle and marine, the ROS forecast is 14% compared to a three-year average target of 11%. Sales are expected to exceed the target due to increased sales of high-value-added motorcycles and highly profitable large outboard motors. In addition, in the financial services business, which supports our existing business, we have relocated most of the operational and control functions of our U.S. operations from headquarters to locally in the U.S. Full-scale operations will begin in 2024 with the aim of achieving sustained growth and expansion in this business. Next, in structural reforms, the decision to conclude a partial transfer agreement for the power products business and to withdraw from the swimming pool and snowmobile businesses is progressing as planned. Growth businesses are expected to fall short due to continued challenging marketing conditions. However, both the SPV and robotics businesses will remain positioned as growth businesses in the long term. In each case, we're steadily improving our production, sales and service systems so that we can respond quickly when the market recovers. And finally, in terms of new businesses, although there is concrete progress in the establishment of a new company in the medical and health field and the launch of a new mobility service, sales are projected to be 10 billion yen in 2024. The next step for us is to address and take initiatives for environmental and resource issues. On the left, efforts to support electrification of marine and motorcycle have moved forward. In marine, there's been an agreement signed to acquire Torquedo, a pioneer brand in the electric domain. In motorcycles, we've invested in World of River. a starter company involved in the manufacture and sale of electric scooters in India. On the right is the progress of research on hydrogen engines. The ROV and Golf car were presented as concept models powered by hydrogen engines. The development prototype of a hydrogen outboard motor will be exhibited at the Miami Boat Show in 2024. To achieve carbon neutrality, we'll promote not only electrification initiatives but also a multi-path development of new energy technologies. Finally, I'll be covering our response to achieve management conscious of capital costs and stock prices. Please see page 13. first a recognition of our current situation our pbr is approximately times 1.1 or 1.1 fold and considering our roe of 15.4 percent in 2023 we recognize that our per is about seven fold we've set our roe target at 15 from the past and have worked with financial discipline we will continue to promote business portfolio management which was introduced in this current mid-term plan to achieve return on capital which exceeds the cost of capital on the other hand PER is about seven-fold and we recognize that improving this is an issue for us as well as through individual business briefings and active dialogue In addition, we will strengthen our sustainability initiatives, including carbon neutrality, employee engagement and human rights. We aim to secure our ESG evaluation by further enhancing our non-financial information. And the opinions obtained through these activities will be fed back to the management and lead to the improvement of corporate value.

Good afternoon. I am Ashtara, and I would like to give you an update per business domains. So first, I want to update you on revenue and operating profit results for 2023 and guidance for 2024. Please take a look at page 15. Starting with 2023 results, motorcycle and RV in land mobility business and marine business achieved increase in both revenue and profit. Financial service and other segment finished the year with increase in revenue but decrease in profit. Both top line and operating profit declined for SPV and robotics business. For 2024 guidance, we are expecting increase in revenue and operating profit for marine, robotics, financial services and other segment. Each subcategories under land mobility business are expected to see increase in profit but decrease in operating profit. Let me go into the details of each businesses. Please go to page 16. The graph on the left is the year-on-year market demand in major markets. The one on the right shows revenue in each region. In 2023, excluding Vietnam, China, and the Philippines, emerging markets as well as Europe and America enjoyed solid demand. Starting from the second half, demand has started to slow down in China and Thailand, but thanks to improvement in premium model supply, we have seen increase in number of shipments globally. In addition, benefit of a pass-on to price expanded, in turn pushed up revenue and operating profit. For 2024 forecast, we are expecting strong demand to continue in Indonesia, India and Brazil. Meantime, Vietnam, China and Thailand are expected to see sluggish demand due to economic conditions, so there will be difference in colors between markets. Yamaha is going to increase premium model supply in emerging markets, but return of competition, increasing expenses due to increasing promotion costs to boost up sales in markets with decreased demand, will bring up top line but push down profit. Now, let me introduce our new product. Please turn to page 17. We have launched XSR 125 ABS in Japan back in December 2023. In addition to the fusion of XSR series identity of timeless and pure style and latest components near a retro concept, it offers lightness and ease of handle which is unique to 124cc engine. For last few years, 51 to 125cc motorcycle with shift gear has been drawing an interest of customers in their 20s. After announcing the launch of XSR125, we have received many orders. Next is marine business. Please go to page 18. The graph on the left side shows year-on-year outboard motor retail registrations in the United States. The one on the right shows revenue per each product. In 2023, demand for large-size outboard motor remained strong. Our model with 300 horsepowers and above had higher units shipment. Meanwhile, consumption among middle-income people in Europe and the United States declined, leading to a drop in demand for small and mid-range outboard models. As a result, outboard motors sales in Europe and the United States declined. On the other hand, outboard motors in other regions, water vehicles and sports boat shipment increased, hence marine business as a whole finished with increase in both top-line and operating profit. For 2024, we are expecting similar trend to continue in each market. Small and mid-range outboard motors inventory adjustment will continue, but we will launch new model for large size model which still enjoys strong demand. We will be meeting large size model needs which is expected to expand going forward. So let me show you our new models in outboard motor launching in spring 2024 and later. Please turn to page 19. This F350B is outboard motor using newly developed V-type 6-cylinder engine. It achieves both overwhelming power and lightness with a sophisticated design suitable for premium motors. After launching in the North American market, we will be launching them in other major markets like Europe and Australia. Please check it out. Next is RV business and financial service business. Please turn to page 20. The left is RV business. In 2023, demand slowed down and the shipment had dropped, but thanks to improvement in production efficiency at the U.S. factory, this segment recorded increase in both revenue and operating profit. We are expecting a replacement demand to support in 2024, but supply has been normalized at all players, price competition expected to be fierce. Yamaha, too, is expecting to increase our promotion cost and other expenses, a forecasting increase in top line but a decrease in profit. The one on the right is a financial service business. In 2023, in tandem with increase in sales volume, receivables increased across the region, pushing up revenue. However, due to sharp rise in interest rate, funding cost has been increasing. In addition, higher allowance for doubtful accounts and interest swap valuation loss were recorded, bringing down operating profit year-on-year. We are expecting revenue and operating profit to increase in fiscal year 2024, coming from higher receivables and passing the cost onto the new receivables while still experiencing impact for higher rate. Lastly, this is growth business, SPV, and robotics. Please turn to page 21. The left is SPV. Bicycle market around the world was going through inventory adjustment in 2023, and Yamaha Motor undergone production adjustment, resulting in big drop in sales volume, ending the year with revenue and profit decrease. We are expecting the trend to continue in 2024 as well. We will adjust model launch timing and enhance our promotion activities at global offices, but expecting it will take until the end of the year to normalize inventory level. The one on the right is robotics. Demand for applications for automobile and industrial devices in developed markets remain strong. However, slowdown in Chinese economy impacted significantly, pushing down revenue and a profit from previous year. We are expecting demand to recover in the second half of 2024. And we are expecting revenue and a profit to grow thanks to new surface mantle launching in March and by strengthening our sales organization in overseas growing markets. This is the end to the explanation for the fiscal year ending December 2023. With this, Yamato Motors' 2023 December term of fiscal financial results are meeting. Thank you very much for watching the YouTube live.